Two contracts dispute whether 18-year-old Zuck sold half to accused scammer for $1,000.

Prosecutors say it took decades for Bernard Madoff to pull off one of the largest financial scams in US history to the tune of $65 billion, an elaborate Ponzi scheme perpetrated against the upper crust of society.

But perhaps there's an even bigger scam afoot, and it involves the ownership of Facebook. The social networking site is valued at $190 billion and used by billions of people daily across the globe.

Unlike Madoff's intricate accounting scheme that netted him a life sentence in 2009, the criminal proceedings surrounding the ownership of Facebook, at its core, rely on a two-page document—a contract that is either forged or worth billions of dollars. Either Facebook Chief Mark Zuckerberg, as an 18-year-old Harvard University student, promised half of his company to a rural New York man named Paul Ceglia, or he didn't.

Round One of this high-stakes battle went to Zuckerberg, who sits in the corner office of the Menlo Park, California-based social networking site. Ceglia, on the other side of the country, is currently free on $250,000 bond and must wear an electronic-monitoring ankle bracelet. He's in legal hot water, facing criminal fraud charges following accusations he forged a contract to hijack half of Facebook [PDF]. The wood-pellet salesman is staring down a maximum 40-year prison term if convicted—yet maintains that he's the true victim.

Paul Ceglia

Ceglia's jury trial in Manhattan federal court is scheduled for November 17, and the government's key witness is Zuckerberg. Other than Zuckerberg, prosecutors' main evidence is the asserted real contract [PDF] and a forensics analysis of the allegedly fake contract that prompted a federal judge in a different case to declare it was "a fabrication" and that Ceglia "knows it" [PDF]. On the other side of the table, however, Ceglia says Zuckerberg hacked or "planted" a forged contract—the one prosecutors say is the original—onto Ceglia family computers in a bid to protect Zuckerberg's own fortunes and to undermine Ceglia's claims. It's a position federal prosecutors contend is without "basis."

Ceglia attorney Joseph Alioto, the former mayor of San Francisco, summed up his view of the prosecution. "There's a lot of dollars at stake, a lot of influence and power at stake," he said. "One of these people is lying, and it isn't Ceglia."

Harvard gives birth to Facebook

History books are already filled with writings that Zuckerberg, as a Harvard University student, launched the social-networking site in 2004 as a Harvard-only network.

What's less known is that, as a computer science student, Zuckerberg freelanced programming work on the side. In 2003, one of his clients was Ceglia, whom he met via a Craigslist ad. Ceglia hired him to perform programming work for Ceglia's former online venture, StreetFax, which provided photographs of intersections to insurance adjusters.

Neither Zuckerberg nor Ceglia dispute this part of the story. It's essentially the only fact upon which they both agree. Herein lies the billion-dollar brouhaha:

As part of that so-called "work for hire" contract, Zuckerberg agreed to provide Ceglia with at least a 50-percent Facebook stake, and Ceglia fronted Zuckerberg $1,000 to make it happen. The contract references a project called "The Face Book" in one place and "The Page Book" elsewhere. At least that's Ceglia's position, according to the contract he submitted to the courts [PDF]. He sued Facebook and Zuckerberg in 2010, demanding the New York federal courts enforce the contract. Along the way, he produced as evidence e-mails between himself and Zuckerberg that seemingly bolstered his position.

Enlarge/ Federal prosecutors say this paragraph from an April 28, 2003 contract between Ceglia and Zuckerberg is a hoax.

Facebook has maintained all along that there was no such "The Face Book" contract or e-mails, and the case has been drawn out by delays and a turnstile of attorney changes on Ceglia's side. Facebook, which declined comment for this story, has repeatedly claimed the photocopied contract submitted as evidence supporting Ceglia's claim was a manufactured forgery and not the original Streetfax contract Ceglia and Zuckerberg each signed. In a 2012 response to Ceglia's suit, for example, Facebook attorneys decried the lawsuit as "a massive fraud [PDF] on the federal courts and defendants." In an e-mail to Ars, however, Ceglia maintains the contract is "genuine."

David Kravets
The senior editor for Ars Technica. Founder of TYDN fake news site. Technologist. Political scientist. Humorist. Dad of two boys. Been doing journalism for so long I remember manual typewriters with real paper. Emaildavid.kravets@arstechnica.com//Twitter@dmkravets